PGE CEO on California Low Carbon Fuels Initiative

Oped by Tom King, the chief executive of Pacific Gas and Electric.

Published: 22-Jan-2007

Thursday, Gov. Arnold Schwarzenegger officially signed into effect the
world's first low-carbon fuel standard, once again positioning California as a
leader in addressing climate change. The governor's executive order to cut fuel
carbon intensity by 10 percent by 2020 represents both smart environmental and
sound economic policy.

The low-carbon fuel standard is a key first step in realizing our state's
ambitious greenhouse-gas emission reduction goals under the Global Warming
Solutions Act. It provides an opportunity for California's citizens and
businesses to reduce our dependence on an increasingly costly and volatile
resource. It also creates a sustainable and growing market for cleaner fuels,
and serves as a way for companies to improve their bottom line, while doing well
by the environment.

Targeting fuels is a necessity in meeting California's goals for reducing
greenhouse-gas emissions. According to the California Energy Commission, more
than 40 percent of the state's greenhouse-gas emissions come from the
transportation sector.

By 2020, this fuel standard will reduce the carbon content of all
petroleum-based transportation fuels by 10 percent. In real terms, this
eliminates 13.4 million metric tons of carbon from entering the atmosphere --
representing over half of the 24 million metric tons of carbon reductions needed
to meet our goals under the Global Warming and Solutions Act. Put another way,
the low-carbon fuel standard is equivalent to removing 3 million cars from the
road.

The value of this policy is not just limited to its impact on addressing
global warming and improving California's air quality. The governor's fuel
standard also will bring tremendous economic benefits for the state's citizens
and businesses.

The fuel standard's pragmatic market-based design serves as an example of how
to create policy that is both predictable and flexible. The policy looks to
markets, not government, to determine the lowest-cost path to achieving the
standards and meeting customer demand.

The fuel standard also will reduce the state's heavy dependence on foreign
oil. A recent report by the California State Board of Equalization found that
California relies on petroleum for 96 percent of its transportation needs. By
reducing our reliability on petroleum-based fuels, we will decrease consumer and
business vulnerability to volatile gasoline prices.

Opponents of the new fuel standard argue that the costs of converting to
cleaner fuels outweigh the environmental and social benefits associated with the
use of these vehicles.

But in PG&E's experience, adopting cleaner fuels has not only reduced our
greenhouse-gas emissions, but has also significantly decreased the costs of our
service fleet.

Over the past two decades, PG&E has been investing in the necessary
infrastructure to support the deployment of its own alternative-fuel vehicles,
including those powered by natural gas, fuel cells and, recently, a plug-in
hybrid vehicle (PHEV). Currently, we operate one of the nation's largest
alternative-fuel utility fleets, and our natural-gas-fueled fleet is the largest
in the nation.

In terms of infrastructure, PG&E owns 27 compressed-natural-gas fueling
stations that supply clean natural gas to our own fleet, as well as 200
commercial and private fleets, including municipal transit operations, private
waste haulers, school districts and private package-delivery providers.

From 1995 to 2005, PG&E's alternative vehicle program avoided using
nearly 2.6 million gallons of diesel and gasoline; that's the equivalent of
taking about 700 cars off the road for a year. That's a cost savings of $1.4
million. If fuel and vehicle tax credits are taken into account, the savings
become even greater.

The low-carbon fuel standard sends a clear market signal to California's
businesses: Now is the time to make investments in cleaner-fuel vehicles.
PG&E is committed to further developing existing and emerging
alternative-fuel technologies and infrastructure as we continue to address the
challenges associated with climate change. We urge other businesses to join us
in making California's future environmentally and economically sustainable.

TOM KING is chief executive of Pacific Gas & Electric. He wrote this
article for the Mercury News.

A study of Europe's car producers found that the industry managed to cut the CO2 output of new cars by 1 per cent last year - less than a quarter of the rate required to meet its own promise to cut emissions by 25 per cent in a decade. PHOTO: 2006 Ford Galaxy European minivan.

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